Leveraged Cat
Equity Swing Trader
McDonald's lacks pricing power, leaving it exposed as food supply and prices look set to become a major issue in 2027. Fast-food chains are price takers on the supply side with products that carry little pricing power, and their downtrend roughly coincided with GLP-1 drugs going mainstream. Without GLP-1s, companies like McDonald's would be worth bidding up aggressively now. x.com x.comÂ
McDonald's faces GLP-1 drugs, runaway inflation, shifting Gen Z preferences and terrible management execution, leaving it in its worst drawdown in 20 years outside of COVID. x.comÂ
McDonald's shares keep falling because the consumer is not doing well, with disposable income at lows. The stock briefly dipped below $250 before rebounding to $251 and remains near multi-year lows. x.comÂ
McDonald's is basically a REIT, so dips like this are good buying opportunities for a long-term portfolio. The stock is 24% below the all-time high it set just a few months ago and trades near a two-year low. x.comÂ
McDonald's is likely to see its metrics hurt over the next year by the rising cost of supporting struggling franchisees. Its rent and royalties hide franchisee pain: US same-store sales rose about 35% while prices rose about 40%, so traffic is likely shrinking, and sales growth slowed to 0.8% in Q2. Per their association, 95% of owners said Q1 profit fell. With remodels costing $400K-$700K per restaurant, McDonald's agreed to take on $8.5B through 2036 in lower rent and capex support. x.comÂ
McDonald's has turned from a growth equity into a bond proxy, a vicious cycle as Treasury yields rise. Per @The_Prophet_, yields moving from about 4% toward 5%+ raise the discount rate on its slow-growing cash flows, give income investors a risk-free alternative, and pressure its capital-intensive franchise system. Investors forget McDonald's shares were unwanted in the mid-2010s. x.comÂ
McDonald's looks attractive in one of its largest drawdowns ever, with its highest dividend yield in 11 years and its lowest P/E in six years. It was appealing at $247 and is a stock to commit to at $239. x.com x.comÂ
McDonald's roughly $8.5 billion plan to help franchisees serve better food, improve service and simplify restaurants comes too late and will likely end the same way as Wendy's. Plunging real estate values add further pressure on McDonald's. x.com x.comÂ
Jack in the Box, Wendy's and Papa John's could all go bankrupt as fast-food prices outrun what consumers will pay. Customers are pushing back or finding comparable value at chains like Chili's. Freight costs from diesel and trucker shortages, plus rising food costs, will squeeze margins. Menus likely need to reset lower, which is hard while input costs climb, and GLP-1 drugs also hurt volumes. Some may be acquired instead, and a few could offer select opportunities as prices reset. x.comÂ
McDonald's is the most obvious buy: its RSI is at levels unseen since 1974, and with bearish headlines on an already beaten-down price, there is little room to get more bearish. Fear articles and downgrades are institutions pushing the price lower so they can load up. This company has survived every recession, crisis and panic for 50 years, so RSI this low on a company this safe makes it a generational entry to build patiently over time. x.comÂ
McDonald's remains a little too rich at 20x earnings for mid-single-digit growth, even though it is one of the best businesses ever created and will probably be around in 100 years. That holds despite its second-worst drawdown in 20 years, down 23.6% from its highs, per Fiscal.ai. x.comÂ
